I am not an investment professional. I do not engage in stock or currency trading. I am a blogger and investor who believes the failure of credit has created an investment demand for gold, and that gold bullion is the sole means of wealth preservation.

1) … The Finviz weekly chart of the S&P, SPY, shows a 1.7% crest higher, preparing to enter an Elliott Wave 3 of 3 Down. The S&P was moved higher this week by a rumored mortgage stimulus for the Too Big To Fail Banks, BAC, C, a risk trade in mining companies, FCX, CLF, AA, RIO, MCP, BTU, VALE, ZINC, and by a sector rise in Agriculture, MON, DE, CF, CAT, Automobile Manufacturers, F, GM, Technology, AAPL, MSFT, Pharmaceuticals, MERC, and Manufacturing, GE. Fundamentals of sovereign insolvency, banking insolvency, inflation destruction, competitive currency devaluation, and corporation profitability exhaustion, do not support a continued rally. The S&P’s candlestick may turn out to be an evening star, but confirmation is needed by next weeks’ trading, before such a determination can be made.

GoldScents relates in $SPX chart article, The Party May Be Over. About it every 35 to 40 days we get a major profit-taking event occur in the stock market. In bull markets that's all it is, a profit-taking event. In a bear market it is a resumption of the cyclical downtrend triggered by deteriorating fundamentals. It still remains to be seen whether or not stocks have rolled over into another cyclical bear market. However we are entering the timing band for one of those daily cycle corrections. It's not unusual to see this begin as a profit-taking event on the employment report, as we enter earnings season. As long as earnings season meets expectations then that is all this should be, just a profit-taking event. However, if earnings season disappoints then this could intensify significantly. If in addition we start to see stress in the European debt market escalate it would magnify the rally in the dollar increasing the downward pressure as stocks begin the move down into that cycle low. Let's face it the problems in Europe aren't going away. The cancer in the debt markets is going to continue to chew its way up the sovereign food chain until it finally reaches the US bond market. The fact that the dollar has consolidated for several weeks above the double top breakout is a strong sign that another powerful leg up is beginning. The kind of selling pressure that is generated at daily cycle lows and especially during an intermediate degree decline effects every asset class to some extent. Gold will be no exception. This is why I have been warning people to wait for the daily cycle low to form in stocks before jumping heavily into precious metal positions. Gold may or may not have put in a final D-Wave bottom last week. But there is a good chance that bottom is going to get tested in the next couple of weeks. And then of course we will have to contend with the selling pressure as stocks move down into their intermediate degree decline in February and March. That could conceivably drive gold back down below $1523, although I think any dip below that level will only be marginal and quickly recovered.

The Elliott Wave 3 of 3 downs are the most devastating waves known to mankind, for all practical purposes they wipe out all all the wealth created on the prior five waves up and they bring out the worst in human nature and governments.

Companies having high levels of debt were among the strongest risers in the fourth quarter of 2011; these include GE, IP, MTW. Tim Catts of Bloomberg reports “General Electric Co. and Ally Financial Inc. lead U.S companies that have $620 billion of bonds and loans coming due in 2012 as borrowing costs start to rise from record lows with the economy strengthening. Borrowers must refinance $498 billion of debt in 2013 and $505 billion in 2014.”

The 01.% rise in Junk Bond, JNK, and the 0.6% fall in High Yield Debts, HYG, as well as the peaking out of the most toxic debt of all Michigan Municipal Bonds, MIW, communicates and end to the risk trade.

3) … Has the world reached the end of money? …. and the end of growth?US Federal Reserve monetary policies together with carry trade lending from banks in Austria and Japan, and the ECB’s LTRO facility have expanded the supply of money as far as possible.

Five nations have inflation rates above 7%. It is because they have lost their debt sovereignty; they pay a high Treasury rate, and as a result their Currency is deflating rapidly in value. The high inflation nations are presented with their Treasury rate, and their Currency rate of value lost: Turkey 10%T, 25%C … India 9%T, 17%C … Brazil 11%T, 10C% … Argentina 5%T, 8%C … Egypt 6%T, 4%C.

These countries have a high rate of inflation, not because of price inflation, which is caused by currency inflow; rather these countries have Weimar inflation, which is hyper inflation, because they are insolvent nations. Insolvent nations have insolvent banks, that is their banks have lost market value. Turkey, TUR, India, INDY, Brazil, EWZ, Argentina, ARGT, and Egypt, EGPT, are experiencing debt deflation, that is currency deflation. These countries experienced hot money inflows through US Federal Reserve ZIRP, and through carry trade investing. But they are now experiencing on going short selling and unwinding of currency carry trade investing. This is debt deflation and inflation destruction working in its prime. I believe they will be amongst the first nations to experience despotism where a leader rules via diktat, replacing democracy. The end of ZIRP means the beginning of diktat and despotism.

Here is a Yahoo Finance Currency Chart showing currency loss of value forTRY, INR, BRL, ARS, EGP. And here is a Yahoo Finance ETF Chart showing loss of stock valueTUR, INDY, EWZ, ARGT, EGPT. This week Argentina, ARGT, rose even more strongly than the S&P, a whopping 5.1%, led by Argentina Banks, BMA, GGAL, BFR, All of Argentina’s banks rose massively stronger, which drew up Latin America Small Caps, LATM, up 3.0%. Risk traders went long with Emerging Market Mining, EMT, up 2.6%, and Emerging Market Financials, EMFN, up 5.0%, but Emerging Markets, EEM, rose only 0.8% to strong resistance to 38.23; its chart shows a rise to the edge of a head and shoulders pattern, coupled with a consolidation triangle; prices usually fall from such patterns.

Emerging Market Currencies, CEW, have been led lower by the Turkish Lira, the Indian Rupe, the Brazilian Real, the Argentina Peso, and the Egyptian Pound. The chart of Emerging Market Currencies, CEW, and the Euro, the Swedish Krona, the British Pound, the Canadian Dollar, the Russian Ruble, and the Australian Dollar, CEW, FXE, FXS, FXB, FXC, FXRU, FXA, shows the current order of currency decline. I believe simply more slippage of these currencies, or a jot higher in the Japanese Yen, FXY, and the Swiss Franc, FXF, will relentlesly continue ongoing competitive currency devaluation. Fears of sovereign insolvency and fears of banking insolvency coupled with growing realization of declining corporate profitability, are the underlying reasons for currency deflation. This deleverages investors out of stocks and commodities. The Age of Deleveraging is well underway.

AlterForex relates Australian Dollar at Risk to Head Down Under in the Week Ahead. All currencies will continue to weaken on Europe debt contagion. A falling Euro, has stimulated disinvestment out of emerging market small cap stocks as is seen in the chart of EUR/USD and VTI, ACWI, VSS, EMT, EPOL, BRF, EWX, VGK.

Doug Noland reports “The US Dollar rose 1.3%. On the upside, the Mexican peso increased 1.4%, the New Zealand dollar 0.4%, the Brazilian real 0.4%, the Australian dollar 0.2%, the Singapore dollar 0.2%, and the Taiwanese dollar 0.2%. On the downside, the euro declined 1.9%, the Danish krone 1.9%, the Swiss franc 1.8%, the South African rand 1.1%, the Norwegian krone 1.0%, the South Korean won 0.9%, the Swedish krona 0.8%, the British pound 0.8%, the Canadian dollar 0.7%, and the Japanese yen 0.1%.”

Currency loss of value, precipitated stock loss of value, that is, currency loss commenced stock loss. The investors fear of July 2011, that a debt union had formed in the Euro zone, precipitated global competitive currency devaluation.

The Dollar was boosted by Europe’s woes. A Dollar Trade emerged to replace the Risk Trade. Beginning in September 2011, the US Dollar, $USD, UUP, began to rise, and there was a flight to safety in Dollar Stocks. The Dollar Rally took Energy Partnerships, AMJ, Pharmaceuticals, IHE, Health Care, XLV, Staples, XLP, Utilities, XLU, and Dividend Payers, DVY, as seen in this Yahoo Finance Chart AMJ, IHE, XLV, XLP, XLU, DVY, higher. I do not expect these to continue to be safe haven investments in 2012. It may be that the commodity gasoline,UGA, has bottomed out in price, and may be headed somewhat higher in 2012, because there is a global Eurasia War coming, which will be centered in Syria and also in Iran. Gold is both a currency and a commodity that is going to be in demand. The scope and intensity of this war is going to be extreme, Reuters reports West Readies Oil Stocks Release As Iran Plans War Games.

When Europe gets a cold, Developing Asia and Poland get pneumonia. The chart of Europe, VGK, together with Developing Asia, GMF, and Poland, EPOL, VGK, GMF, EPOL, communicates that debt contagion spreads to the developing nations as carry trade lending gets liquidated when credit evaporates. History squared reports BIS Describes the Exposure of Emerging Markets to Europe The December ‘11 BIS Quarterly report provides insight into the inter country credit links as well as some of the consequences of the European sovereign debt contagion. The steady growth of foreign credit to emerging market economies has suddenly become unsteady, as European banks sell off assets, raise lending standards, and reduce trade credit. The appreciation of the dollar further puts pressure on cross boarder financing, since much is priced in dollars. An exposure study shows Asia-Pacific appears to be the region most exposed to sudden capital withdrawals. “Not only do boarder claims represent 52% of all foreign lending, 63% of all international claims on residents of that region had a remaining maturity of less than one year.”

George Albert relates in $DYX chart article Dollar Bears Fail To Force Sell Off; It’s Not Good News For Equity The dollar bears have failed to push the greenback down for nearly three weeks, increasing the prospect of a further rally. This does not augur well for equities and the Indian rupee. In an article published on 7 December 2011, we had mentioned that the dollar had reached a level of resistance and could sell off. Prices often fall from resistance levels. The dollar did sell off twice, which pushed up equities and the Indian rupee a bit. However, a look at the chart now will show that the dollar index hit the resistance level between 80.80 and 81.50 twice. On Friday, the index hit the level a third time and went deeper into the resistance level. This shows that the bears have failed to sustain a selloff, indicating the strength of bulls. If the index closes above 81.50 on any trading day, the dollar can rally higher. On Friday, the dollar index moved back into the resistance level for the third time. This reduces the probability of a dollar sell off. If the index breaks the 81.50 level, it can go all the way up to the next resistance level of 83. A dollar rally usually does not augur well for the Indian rupee and equities. We could see the rupee fall, unless the Reserve Bank of India intervenes in the market.

Can both gold an the US Dollar rise? Perhaps so, but not for too long as oil and water do not mix, one will rise above the other. In 2012 the investment demand for gold will resume as investors become increasingly concerned about the Federal Reserve’s and the ECB’s credit liquidity and collateral lending policies which monetized debt globally and have finally caused the global government finance bubble, BWX, to burst.

The debt debauchery practiced central bankers, has run up bad credit to grotesque levels. The monetization of debt by the world central banks is causing the death of fiat money, and a most painful deleveraging and derisking out stocks.

The monetary policy of US Federal Reserve and the ECB, coupled with ongoing fiscal profligacy both in the United States and Europe, especially Italy, and its lax tax collection policy, and Greece with its insistence on a constitutional prohibition on dismissal of state workers, as well as the inability of Spain to enforce austerity measures both on a country wide and regional basis, is going to continue cause global debt contagion, that is debt deflation globally. Debt deflation and exhaustion of central bank credit, is causing an unwinding of carry trade investment and stimulating derisking out of natural resource stocks, IGE,PSCE,XOP, XLE, OIH, IEZ, IYM, seen in this Finviz Screener, even though they rallied strongly this week.

The coming epoch of debt deflation will mean job losses and wage reductions for many; as well as the destruction of the fixed income dividend investor; such are best to throw in the towel now; live by the consequences and buy gold which will be the only form of wealth sustainability. Steve Keen writes, a major reason why Bernanke was appointed Chairman of the Federal Reserve was that he was allegedly an expert on the Great Depression. In Misunderstanding the Great Depression and the Great Recession, I explain why he and almost all neoclassical economists, including Paul Krugman,don’t understand why the Great Depression occurred, and have barely a clue as to why we are now, once again, trapped in a debt-deflation.

Ongoing global currency deflation means the end of money, and the end of growth. Growth cannot expand in the US and globally when currencies fail. FRED Real Gross Domestic Product GDPC1 will be turning down. US Federal Reserve policies provided inflationism and economic expansion; now its policies have turned toxic resulting in destructionism and soon coming economic contraction.

The end of money actually commenced when carry trade lending began to fail when the Yen began to rise relative to world currencies beginning in April 2011 as is seen in the chart of FXY, CEW, FXE, FXS, FXB, FXC, FXRU, FXA, INR

Fat tails tend to occur in sheep, and in sheeple. Mohamed A. El-Erian in the WSJ writes Investing in a Fat Tail World. By pushing interest rates to very low levels, central banks are pushing investors out the risk spectrum. The NYT relates that the alliterative definition of a fat tail is an abnormal agglomeration of angst. Behavioral Finance defines fat tails as wandering far from the normal lanes, to put it simply, fat tails are seen when too many events or values stray widely from the average. Finance Dictionary relates a fat tail is a statistical distribution that is wider or larger than expected, increasing the probability that an extreme or unexpected value will result … Fat tail risk is a prime reason for investing in and taking possession of gold.

In the age of deleveraging, gold and diktat are the only two forms of sovereign wealth. The chart of the gold ETF, GLD, shows a 3.4% rise this week. I recommend that one dollar cost average buy gold bullion at this time, and look for safe ways of storage such as purchasing a gun safe.

4) … Political capital is replacing investment capital as the dynamo that governs the world’s economic and political endeavors … The seigniorage of diktat is rising to replace the seigniorage of fiat money.The spigots of investment liquidity, carry trade lending and central bank easing have been turned off; and former flows are now running toxic. Insolvent sovereigns and insolvent banks cannot support investment expansion or economic growth. Fiat currencies are dying. The seigniorage of fiat money is being replaced by the seigniorage of diktat, as evidenced by the rise in power of the EU ECB IMF Troika, as well as by the appointment of technocratic government in Greece and Italy. Fiat money is being replace by the currency of diktat. The global investment, economic and political tectonic plates have shifted, and an authoritarian tsunami is on the way; political capital is replacing investment capital, as indicated by the following news reports.

Lawrence Porter of WSWS reports Rally Against Emergency Manager Law. Under the guise of opposing the threat of an emergency manager in Detroit, a highly orchestrated rally was held by Detroit’s Democratic Party establishment Monday evening.

Shannon Jones of WSWS reports Who’s Who On Detroit’s Financial Review Panel. Those appointed by Michigan Governor Rick Snyder to an emergency financial review board to examine Detroit’s finances are drawn from an elite milieu of wealthy executives and political insiders.

Look! And See! Read the New York Times. Subscribe to email delivery of Euro Intelligence Briefing. Open your mind. A bloodless coup d etat is underway in the EU. Take the Red Pill, and know the truth of the Morpheus Proposal. "What truth?" asks Neo. "That you are a slave, Neo. Like everyone else you were born into bondage, born into a prison that you cannot smell or taste or touch. A prison for your mind. "Unfortunately, no one can be told what the Matrix is. You have to see it for yourself. "This is your last chance. After this, there is no turning back. "You take the Blue Pill. The story ends. You wake up in your bed and believe, whatever you want to believe. "You take the Red Pill. You stay in Wonderland, and I show you how deep the rabbit hole goes. "Remember. All I'm offering is the truth. Nothing more."

Out of sovereign armageddon, that is a credit bust and global financial collapse, regional global governance will be established; this having been called for by the 300 elite of Club of Rome in 1974. Destiny, not any human action, will bring forth a revived Roman Empire, that is a German led Europe. Fate will open the curtains, and out onto the world’s stage will step the most credible of leaders. This Little Authority will work behind the scenes in regional framework agreements to change our times. The rule of law will be replaced by his word, will and way, as he mandates sweeping economic and political changes. The people will be amazed by this, and place their faith and trust in him; they will give their allegiance to his diktat.

The Sovereign will be accompanied by a European banker, the Seignior, who will appoint stakeholders from government, industry and finance to oversee public private partnerships, PPPs, to provide credit, manage infrastructure, and resources, critical to the security and stability of the Euro zone. Regionalism is the new dimension in globalism. This pattern of regional global governance will be replicated in Asia with bilateral trade agreements between Japan and China, as well as the Shanghai cooperative, and the CELAC group in South and Central America. Eventually a defacto North American Union will form; it will be known as CanMexAmerica. Banks globally will be nationalized, better said, integrated into the regional super structure. Structural reforms, austerity measures, pension overhauls, reworked national wage contracts, dismissal of government employees, and debt servitude will be de rigueur.

What kind of structural changes are coming? First and foremost, the right of a constitutionally guaranteed state job in Greece, with an extra two extra months’ salary! This right of employment guaranteed by the state makes Greek Socialism the most extreme form of socialism every known. Physicians, pharmacists, even pharmacy technicians have the golden right, and Nita Ghei of the Washington Times reports public employees are furious they may have to shoulder some of the burden of the austerity measures put in place to qualify the debt wracked country for more European Union and International Monetary Fund bailout cash. Reuters reports Greece Needs A Bigger Debt Haircut German Adviser. Greece misrepresented its debt upon entering the EU and has never abided to the terms of the Treaty. It’s unlikely that Greece will be leaving the EU. The debt of Greece is going to be reduced to zero, but not written off, and will be applied to all those using the Euro. Scores are going to be cut off the public patronage employment system. Greek Socialism and European Socialism is going to be literally “announced away” by the New Europe sovereign leaders who are going to meet in summits, waive national sovereignty, and establish a European Federal Superstate, mandate a european fiscal union, and establish the ECB or the Bundesbank, that is Buba as the Euro’s Bank. Life in Europe will be characterized as a totalitarian collective. Totalitarian collectivism is the EU’s future. European Socialism will die in 2012. And Libertarianism’s desire for Freedom and Free Enterprise are simply mirages on the Neoauthoritarian Desert of the Real. Choice is an epitaph on Neoliberalism’s tombstone.

European banks today are financial zombies that stalk the European continent. The ECB’s LTRO facility, and Bernankeism have zombified the banks. This week’s rise in the S&P is simply an ongoing result of zombification. Ben Bernanke mastered the art of inflationism, and now the world is reaping the disaster of both zombification and destructionism.

Credit easing has made money bad. Bad money has finally led to intense investment derisking and carry trade deleveraging, and is now creating hyperinflation, that is Weimar Inflation, in Turkey, India, Brazil, Argentina and Egypt. The way of currency debauchery is the also the road to serfdom; despotism and diktat will soon govern these nations.

US Federal Reserve policies, specifically the credit liquidity policies of ZIRP, QE1, QE2, and Dollar FX Liquidity Swaps, have finally caused currency devaluation worldwide. Bernankeism has upset the normal dynamics of sovereign debt. His central bank credit liquidity policies have closed the 40 year chapter of human history known as Neoliberalism. The Milton Friedman, Free To Choose, Banker Regime, where democracy and inflationism ruled, is finished, done and over. Currencies are no longer floating; they are sinking. The age of destructionism has commenced, and with it, the currency of diktat is coming into use.

Neoliberalism featured The Spirit of the Cat In The Hat, and Wildcat Finance, a Doug Noland term, where bankers waived magic wands and created credit and money out of thin air. Now Neoauthoritarianism features The Spirit of Wilding, and Wildcat Governance, where people riot and leaders raise clubs threatening to beat people into submission.

No way, never ever, will there be a sound banking and monetary system. The Beast Regime of Neoauthoritarianism is rising out of the death of fiat money. This behemoth of statism and regional global governance is a monster, having seven heads, that is rising to occupy in all of mankind’s institutions, and ten horns, that is going to rule in all of the world’s ten regions. Regional global governance is rising out of the failure of fiat money; it will come to govern mankind through a soon coming credit bust and global financial collapse.

Binyamin Appelbaum of the NYT reports A Shrinking Military Budget May Take Neighbors With It. Along a street named SAIC CT, military contractors such as SAIC, CSC, and CACI, in northern Virginia, are at risk for loss of revenue. Military spending has transformed the faded farmlands of northern Virginia into a land of glass-block office parks, oversize homes and sleek cars. Average household incomes there are among the highest in the United States. Companies with names like the Science Applications International Corporation, Computer Sciences Corporation, and CACI International, built large campuses employing thousands of workers, mostly around the growing Tysons Corner crossroads. The looming Defense Department cuts come from two sources. The Obama administration, as part of its deficit-reduction plan, has committed to cut military spending by $450 billion over the next decade. And the failure of Congress to agree on a plan for deficit reduction by a November deadline triggered a law requiring another $500 billion in Pentagon cuts over the next decade, starting in 2013.

Andy writes in New Regionalism and the East Asian Economic CooperationUnder the new regionalism, the four kinds of structure which belong to East Asian economy cooperation established and developing, they have the possibility to become the embryonic form that the East Asian economy community have.

NL-Aid writes The creation of the Community of Latin American and Caribbean States (CELAC) at a summit of heads of state from the region in Caracas in November reflects the growing sense of regional autonomy and self-confidence in Latin America and the Caribbean. The CELAC was ratified by 33 countries in the region. Unlike the Organization of American States (NYSE:OAS), it does not include the United States and Canada. Also, unlike the OAS, it does include Cuba.

Chris Martenson writes The bad news out of Europe continues unabated, including debt and ratings downgrades, sliding economic growth, and exploding red ink. Ireland is an instructive case because it entered its difficulties earlier, and it has already received a bailout and implemented the austerity measures that were meant to balance the equation. Unfortunately, the plan is now in tatters with the recent revelation that the Irish economy is slumping more than expected under the twin weights of reduced lending and imposed austerity. Ireland's debt yields are instructive here. While it is true that Ireland's debt yields are down quite a lot from their maximum levels (which were over 23% for 2-year paper and 15.5% for their 9-year debt), the current yields of 7.9% and 8.6%, respectively, are utterly unsustainable for an economy that is shrinking. It is only a matter of time before those rates crush the finances of the Irish government. Do you know why the generally agreed-upon limit for persistent government deficits is 3%? That's because it's the basic rate of GDP growth that history has shown to be sustainable. As long as deficits are growing at the same rate as the economy, then the debt-to-GDP ratio stays constant and everybody is happy. If (or when, I should say) the economy grows more slowly than the rate of interest that is demanded from a government, it is a mathematical certainty that either the deficits will swell or austerity and/or tax hikes must be imposed. There is no other way to balance the books. On this basis, Ireland is still mired in a math problem.

Richard Florida and Charlotta Mellander of the Martin Prosperity Institute present the "Geography of Health" in The Atlantic Cities and explain Why Some Cities Are Healthier Than Others. The kinds of work people do also plays a role in smoking and obesity levels. Metros with higher percentages of creative class workers do consistently better on the Metro Health Index (the correlation is .38), while metros with higher shares of blue-collar workers do significantly worse (a correlation of -.43). Metros with greater shares of high-tech industry also have higher scores on the Metro Health Index (with a correlation of.46)."

The healthiest metros are where creative people work, such as San Jose, Santa Cruz, Boulder, and Bridgeport-Stamford-Norwalk. Richard Florida relates in Creative Class The Geography of Obesity California, Connecticut, Colorado, Utah, Massachusetts, Vermont, Minnesota, and Hawaii have lower body mass index, BMI, and greater well being. “Obesity is lower in states with higher concentrations of artists, musicians, and entertainer, those with larger concentrations of gays and lesbians, immigrants; this likely reflects broader structural characteristics of those states, as more highly educated states also tend to be more tolerant and open to diversity”. Creative, professional, and knowledge workers seek out employment opportunities in creative metro areas. Creative people are by nature not bipolar whereas as blue collar workers are many times bipolar, they have engaging careers, have better social interaction skills, stay married, participate in daily moderate exercise such as walking, eat more vegetarian, have better medical, mental and dental care, use moderation in eating and drinking, do not smoke, and perceive them selves to be part of a larger community; creative people know their values, passions and talents, and how to share them on a regular basis; and thus they have lower body mass index, BMI, and better health. Living With Bipolar relates Many patients present with both bipolar and obesity.

But blue collar workers are marked, as a group, by mental illness, divorce, promiscuity, out of wedlock children, unmarried females heading up households, a cynical view of the future, parents who have not completed high school, lack a family ethic of education, lack of tutoring resources, participation in antisocial, aggressive, and confronting behavior, where Elijah Anderson relates, the “code of the streets” prevails. Creative people find time each day to meditate, have a spiritual practice, nap, pray or enjoy a happy hour; but blue collar workers listen to rap, country or blues music. Yale School of Public Health reports Laborers and other workers in traditionally blue-collar jobs have a “significantly” higher body mass index after retirement than their peers who worked in management and other executive positions, a study by the Yale School of Public Health has found

Josh Harkinson of Mother Jones provides a Profile of the Most Conservative Zip Code in Texas Highland Park, ZIP code 75205, represents the top of the 1% in Texas, and is the most enthusiastically Republican community in the country. The enclave of Highland Park in Texas might be considered the conservative equivalent of Berkeley, California. In 2010, the city had the highest share of donations to Republican party. "It's no secret why Highland Park attracts so many rich conservatives. It has a prime location near Dallas' financial center and one of the lowest property tax rates in a state with no income tax. Yet it has one of the nation's best school systems and an average emergency response time of 2.5 minutes.

Steve Keen reports Australian Real Home Prices Have Started To Decline. The financial sector had enticed Australians to go from a 50% to a 70% mortgage debt to GDP ratio (at a time of rising interest rates). The combination of higher rates and much higher debt levels means that paying the mortgage is taking far more out of the family purse than it used to do back in the pre Housing Bubble years. Readily available data from the RBA shows that interest payments on household debt are five times as high as they were back in the 1970s. Interest payments on mortgage debt are as much as ten times as high now as in the 1960s. Spruikers also prefer to ignore the fact that debt has to be repaid, and focus on the interest payments alone. In the past mortgages been paid off after 5-7 years via the resale of the property, but that will be a lot more difficult in future as house prices fall. On this basis, there has been a twelve-fold increase in the proportion of family income that has to be devoted to servicing mortgages since 1970. Even compared to the high interest days of 1990, mortgage debt service is now 2.5 times as burdensome. There is clearly no capacity for debt service to take a larger slice of the family income pie, which in turn is taking the wind out of the housing market. For prices to rise, demand must also be rising, and this requires not merely rising mortgage debt but accelerating debt. Of course variations in income (and variations in supply too) can play a role, but in the overwhelmingly speculative, overly leveraged market that Australian housing has become, accelerating mortgage debt trumps the lot. This is especially so since such a large percentage of buyers are so-called. Investors, so called, because a better description is speculators. Both sources of demand are now falling strongly from the artificial boost given by Rudd’s spin of the FHVS sauce bottle. One of the world’s last and greatest house price bubbles is thus finally ending.

Steve Keen relates in Preamble To A Modern Jubilee The fundamental cause of the economic and financial crisis that began in late 2007 was lending by the finance sector that primarily financed speculation rather than investment. The private debt bubble this caused is unprecedented, probably in human history and certainly in the last century. Its unwinding now is the primary cause of the sustained slump in economic growth. The recent growth in sovereign debt is a symptom of this underlying crisis, not the cause, and the current political obsession with reducing sovereign debt will exacerbate the root problem of private sector deleveraging. The economic and financial crisis has been caused by unenlightened self interest and fraudulent behaviour on an unprecedented scale. But this behaviour could not have grown so large were it not for the cover given to this behaviour by the dominant theory of economics, which is known as “Neoclassical Economics”. Though many commentators call this theory “Keynesian”, one of Keynes’s objectives in the 1930s was to overthrow this theory, but instead, as the memory of the Great Depression receded, academic economists gradually constructed an even more extreme version of Neoclassical economics than that against which Keynes had fought.

Regulators in its thrall, such as Greenspan and Bernanke, rescued the financial sector from a series of crises, with each one leading to yet another until ultimately this one, from which no return to “business as usual” is possible. Neoclassical economics therefore played an important role in making this crisis as extreme as it became. It is time to succeed where Keynes failed, by both eliminating this theory and replacing it with a realistic alternative. I wroteDebunking Economics (Keen 2001; Keen 2011) to help prevent a Neoclassical revival recurring after our current crisis is over.

Michael Hudson’s simple phrase that “Debts that can’t be repaid, won’t be repaid” sums up the economic dilemma of our times. This does not involve sanctioning “moral hazard”, since the real moral hazard was in the behaviour of the finance sector in creating this debt in the first place. Most of this debt should never have been created, since all it did was fund disguised Ponzi Schemes that inflated asset values without adding to society’s productivity. Here the irresponsibility, and Moral Hazard, clearly lay with the lenders rather than the borrowers. The only real question we face is not whether we should or should not repay this debt, but how are we going to go about not repaying it? a Jubilee in our modern capitalist system faces two dilemmas. Firstly, in any capitalist system, a debt Jubilee would paralyse the financial sector by destroying bank assets. Secondly, in our era of securitized finance, the ownership of debt permeates society in the form ofasset based securities (Pending:ABS) that generate income streams on which a multitude of non-bank recipients depend, from individuals to councils to pension funds. Debt abolition would inevitably also destroy both the assets and the income streams of owners of ABSs, most of whom are innocent bystanders to the delusion and fraud that gave us the Subprime Crisis, and the myriad fiascos that Wall Street has perpetrated in the 2 decades since the 1987 Stock Market Crash. We therefore need a way to short-circuit the process of debt-deleveraging, while not destroying the assets of both the banking sector and the members of the non-banking public who purchased ABSs. One feasible means to do this is a “Modern Jubilee”, which could also be described as “Quantitative Easing for the public”.

Keith Weiner writes Inflation: An Expansion of Counterfeit Credit. The Keynesians and Monetarists have fooled people with a clever sleight of hand.Anyone who has ever been at a magic act performance is familiar with how sleight of hand often works. With a huge flourish of the cape, often accompanied by a loud sound, the right hand attracts all eyes in the audience. The left hand of the illusionist then quickly and subtly takes a rabbit out of a hat, or a dove out of someone’s pocket.Watching a performer is just harmless entertainment, and everyone knows that it’s just a series of clever tricks. In contrast, the monetary illusions created by central banks, and the evil acts they conceal, can cause serious pain and suffering. the dealers in counterfeit credit, by nature and design, must work constantly to extend it, postpone it, “roll” it, and generally maintain the confidence game. Counterfeit credit cannot be liquidated the way legitimate credit can be: by paying it back normally. Sooner, or later, it inevitably becomes a crisis that either hurts the creditor by default or the debtor by threatening or seizing his collateral. I repeat my definition of inflation and add my definition of deflation: Inflation is an expansion of counterfeit credit. Deflation is a forcible contraction of counterfeit credit. Inflation is only possible by the initiation of the use of physical force or fraud by the government, the central bank, and the privileged banks they enfranchise. Deflation is only possible from, and is indeed the inevitable outcome of, inflation. Whenever credit is extended with no means or ability to repay, that credit is certain to eventually become a crisis that threatens to harm the creditor. That the creditor may have collateral or other means to force the debtor to take the pain and hold the creditor harmless does not change the nature of deflation.

Thomas Greco Jr. writes Jubilee: The Only Way Out Of The Global Financial Predicament. As I wrote more than three years ago in The End of Money, “the growth god is dead.” We must face the fact that the limits to physical growth have been reached. This does not necessarily mean a decline in living standards or a global war for control of resources. There is plenty enough to provide a dignified life for everyone on the planet and even two or three billion more. We have been tremendously successful in developing “labor saving” machinery and technologies that can make us more healthier and more comfortable. The problem is that those benefits have not been equitably distributed and the whole range of incentives that are built into the industrial society promotes waste and conflict. We can all live much better while consuming less stuff, but to achieve that we’ll need to reinvent money, banking and finance. Accelerating debt growth cannot continue much longer. One way or another, much of the existing debt will need to be written off in the coming years. Will it be done deliberately, fairly, and systematically, or in a chaotic collapse of the global financial system?

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha
community. Instablog posts are not selected, edited or screened by Seeking Alpha editors,
in contrast to contributors' articles.

Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.